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Last week this column highlighted some of the issues in measuring consumer price inflation (CPI) in Pakistan. In our continuing coverage of the same today, this piece will focus on the health group within CPI and how perhaps the Pakistan Bureau of Statistics (PBS) could change the way its historically included or excluded items from the overall CPI basket.
Lets take the latter first. According to Shaukat Zaman, Director Price Statistics at the PBS, field officers from the relevant department at the PBS are being sent to a pre-agreed number of markets in different cities across Pakistan (76 markets/40 cities as per 2007/08) to take notes of what's being consumed and what is not.
While these observations are not being made a part of any formal survey questionnaire, the responses of these field officers are submitted to PBSs technical committee, which comprises of representatives from Pakistan Institute of Development Economics, independent think tanks such as the Social Policy Development Centre, business chambers and trade unions, academic research clusters and so forth.
The technical committee then takes a decision based on the suggestions given by field officers to include or exclude items from the overall CPI basket.
Once the list is finalised, the PBS conducts the Family Budget Survey to arrive at the weights to be given to each item on the list. (For complete list of items, see Brief Recordings section, Feb 19, 2015)
While all this may be done in good faith, the very process of including or excluding items from the list is somewhat arbitrary i.e. based on the feedback of field officers. The last time this process was ran (2007/08), we had some strange items on the list - such as Sega video games and video cassettes (See: BR Research column: Issues in measuring consumer price inflation, Feb 19, 2015).
Considering that unlike most other government institutions, the PBS has opened up a healthy debate on the subject (credits for which), by inviting all the stakeholders at a consultative workshop earlier this month, this column would like to highlight a few concerns pertaining to the health group of the CPI basket.
At present the health group comprises of 39 items, the details of which can be seen in last Thursday's Brief Recording section. Some of these items clearly need to be excluded; such as the Septran tablet which is totally obsolete. But since BR Research doesn't claim any expertise on medicines, we turned to Dr Shimail Daud, former president of Rawalpindi Chamber of Commerce and Industry. He has the following to suggest. Shimail says that there is a need to include third generation antibiotics in the list, which are consumed across poor and rich income groups. He also stresses on the need to increase the number of diagnostics - such as CT scan, ultra sound, MRI - all of which are prevalent across all income groups.
Similarly, medicines for some chronic and fatal diseases such as diabetes, hepatitis, and cancer need to be included. Vaccinations for children as well as maternity related medicines and hospital expenditure also need to be added to the basket.
While Shimail claims no expertise in the methodological areas of the CPI, he maintains that household expenditure on health seems to be much higher than what is reflected in the existing basket (2.19 percent). Arif Jabbar Khan, Country Director of Oxfam Pakistan, somewhat echoes Shimail's views. Arif says that post distribution monitoring of Oxfam's cash-based programmes shows that poor families (especially) - spend the most on health issues after food and shelter.
The flaw in the existing weight of health group, therefore, probably stems from the fact that many important and unavoidable health related items are not added to the CPI basket, and therefore its weight is less than 3 percent.
This column gives due credit to the PBS for opening up a healthy debate on the rebasing of CPI - something, which was not very noticeable the last time around or the years before. And we hope that in that very spirit, it will remove the arbitrariness of the way items are included in or excluded from the basket.
If time or budget constraints prevent the PBS from conducting a survey before the Family Budget Survey (which is used for assessing weights) then at least the PBS should task sector specialists (such as medical experts for health group) to suggest items to its technical committee instead of relying on field officers. Lastly, while there can be no such thing as ideal or perfect basket to measure CPI, rest assured any measurement for CPI will be as good as the list of items it is taking into account. Here is hoping that this time, we would get the measurement right.

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